Judge: Contract shielded rig owner in Gulf spill

Transocean could still pay billions in other penalties

by Harry R. Weber - Jan. 26, 2012 11:40 PMAssociated Press

NEW ORLEANS - The rig owner involved in drilling the ill-fated well that blew out in the Gulf of Mexico and spewed more than 200 million gallons of oil will not have to pay many of the pollution claims because it was shielded in a contract with well-owner BP, a federal judge ruled on Thursday. The ruling comes as BP, the states affected by the disaster and the federal government are discussing a settlement over the nation's largest offshore oil spill.

The decision may have spared Transocean from having to pay potentially billions of dollars in damage claims. However, U.S. District Judge Carl Barbier said the driller still is not exempt from paying punitive damages and civil penalties that arise from the April 20, 2010, blowout 100 miles off the Louisiana coast. Those penalties could amount to billions of dollars.

Law experts were split over who is a clear-cut winner.

BP has been pursuing agreements with multiple parties to reach settlements that would make an upcoming trial involving hundreds of spill lawsuits in New Orleans unnecessary, or at least resolve as many of the issues as possible.

The Justice Department also is involved, working with the states to create an outline for a settlement that would resolve their potentially multibillion dollar claims against BP and the other companies involved in the disaster, Alabama Attorney General Luther Strange told the Associated Press.

Justice led a meeting last week in Washington among the states in an effort to formulate an agreement that would satisfy government and state claims, including penalties and fines, Strange said. He also indicated if there is a settlement that officials are discussing what to do with the $20 billion fund set up by BP to pay victims.

The lead attorneys for individuals and businesses suing BP were not at the meeting.

According to Strange, a federal magistrate judge has been asked to expedite settlement discussions. The Louisiana attorney general's office said in a statement to the AP that it is in settlement discussions with BP, which would not comment on any deals in the works. A first phase of the trial is set for Feb. 27 to determine liability for the spill.

"The closer you get to a trial date, the more pressure builds to reach a settlement," Strange said.

Despite the decision, BP claimed victory and said Barbier's ruling "at a minimum" left Transocean facing "punitive damages, fines and penalties flowing from its own conduct."

Transocean spokesman Lou Colasuonno said in an e-mailed statement that the company was pleased to see its position affirmed.

BP PLC, Transocean Ltd. and Halliburton Co. have been sparring over who was at fault for causing the blowout. The out-of-control well was capped in July, 2010. Federal investigators have said that BP bears ultimate responsibility for the spill, but has faulted all three companies to some degree.

Under a drilling contract, BP and Transocean agreed to indemnify each other in the case of an accident, with BP taking responsibility for pollution originating from the well and Transocean for any pollution or accidents aboard the rig.

However, in court BP argued that the contract did not shield Transocean if the drilling company acted in manner that was grossly negligent.